The empty value of airline ticket credits

Holiday travelers check in at the United Airlines ticket counter at Terminal 1 in O'Hare International Airport in Chicago on Saturday, Dec. 21, 2013. (Nam Y. Huh/AP)

Bethany Tully might have been forgiven for her confusion. After canceling an upcoming flight from San Francisco to Boston under unhappy circumstances, she discovered that her ticket credit on United Airlines was worth about half what she expected — an increasingly common complaint among air travelers.

Earlier this year, Tully, a chef based in San Francisco, had booked three tickets on Hotwire.com to visit a close friend. “Tragedy struck just before the trip,” she says. “He committed suicide.”

A Hotwire representative assured the grief-stricken customer that she didn't need to worry. “I was told that I could cancel the tickets and Hotwire would issue a full credit to be used within 12 months,” says Tully. “But I have tried numerous times to use the credits — one being for his funeral service — with no luck.”

Tully found herself in a common situation, at least among infrequent air travelers. Ticket refund rules can be complicated and confusing. Mostly, though, passengers want to know what they can do to avoid a situation like Tully's: stuck with a ticket credit that's worth far less than they expected.

The preferred solution, as far as United is concerned, would be for a customer like Tully to purchase a fully refundable ticket. A nonrefundable round-trip flight booked seven days in advance on United cost $467. But a fully refundable ticket would have set her back $1,961, or a little more than four times as much as the restricted fare, which isn't unusual. That makes buying a more flexible ticket an option for only the most affluent air travelers.

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United allows passengers to use part of their ticket credit for a future flight, minus a $200 change fee and any fare differential. So how about a refund on compassionate grounds?

Another way to protect your ticket purchase is with travel insurance. The typical policy, referred to as a “named peril” policy, covers a variety of events, including a cancellation, delay, emergency medical transportation, loss of baggage and identity theft. But only a few policies cover suicide, according to Linda Kundell, a spokeswoman for the US Travel Insurance Association, a trade group for travel insurance companies. Also, those policies may cover only a non-traveling family member who takes his own life, not a friend.

“It's important to read the policy carefully,” Kundell warns.

Yet another insurance option is a so-called “cancel for any reason” policy, which can cost 10 percent or more of your trip's prepaid, nonrefundable cost, or about twice the cost of a named-peril policy. But that refunds only somewhere between 70 and 80 percent of the cost of your trip.

Tully could also have taken her business elsewhere initially, to an airline with a less restrictive refund policy. Southwest Airlines, for example, offered a one-stop from San Francisco to Boston for $377. Had Tully canceled her flight, she could have received a full credit and avoided paying any change fees. JetBlue, which offers direct flights from San Francisco to Boston, had a nonrefundable fare of $472 and a change fee of $150. Tully says that she checked Southwest and JetBlue before she settled on United but that tickets were unavailable for her desired travel dates.

What makes a traveler choose United over Southwest or JetBlue? United maintains a dominant 46 percent market share in San Francisco, which means that passengers like Tully often have only one real option when they want to fly somewhere. They're probably members of United's frequent-flier program, MileagePlus, and willing to pay more for their flights in exchange for a promise — not always kept — of a “free” ticket to Hawaii or Europe. In other words, their forced loyalty to one airline is prodding them to choose a more expensive and more restrictive ticket.

One of Tully's last options was to appeal to United, hoping that it would waive some of its refund rules or issue a refund, since she no longer had a reason to fly to Boston. She says that she phoned the airline repeatedly but that it never responded to her requests. United has a mixed record on waiving its fees, and its current policy is unclear.

Last year, when I visited the airline's corporate headquarters, United's executives told me that agents had some flexibility in applying the rules. But when I followed up to see whether that policy remained in effect, an airline representative declined to answer my question, saying that a passenger like Tully was welcome to call the airline directly if she had questions about its rules.

Tully turned to Hotwire, the online travel agency that had sold her the ticket. In a series of phone calls, she learned that far from having “nothing” to worry about, her ticket credit came with all kinds of unexpected restrictions, including being non-transferable and not usable for discounted fares. Paradoxically, Tully would have to spend another $600 to take advantage of her credit.

“It was nonsense,” she says. What's more, United and Hotwire started pointing fingers at each other when she questioned the rules. “United says it's Hotwire's policy, and Hotwire says it's United's policy,” she adds.

I contacted Hotwire to get its side of the story. The company agreed to review Tully's booking and its call records. Garrett Whittemore, a Hotwire representative, says that although the company is simply a booking agent, it holds itself to a “higher standard” when dealing with customers.

“Our reps did share the correct information throughout the calls, but we did not go above and beyond to walk Bethany through all the contingencies that she might experience as a result of her desire to cancel, in reference to potential change fees specifically,” he says. “She will be receiving a full refund from Hotwire because we feel like we missed an opportunity to educate her on exactly how airline cancellation policies work.”

When airline change policies are so complicated and counterintuitive that customers need to be “educated” about them, there's something wrong with the airline industry.

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